Levy & Partners Ltd v Mr Nicholas Barnett (as liquidator of C.C.T. Logistics Ltd)
| Jurisdiction | England & Wales |
| Judge | Barber |
| Judgment Date | 30 June 2023 |
| Neutral Citation | [2023] EWHC 1548 (Ch) |
| Court | Chancery Division |
| Docket Number | CR 2021 001686 |
[2023] EWHC 1548 (Ch)
ICC JUDGE Barber
CR 2021 001686
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF C.C.T. LOGISTICS LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
7 The Rolls Building
Fetter Lane
London
EC4A 1NL
Ms Hilary Stonefrost (instructed by Isca Legal LLP) for the Applicant
Mr Mukhtiar Otwal (instructed by Neves Solicitors LLP) for the Third Respondent
Hearing dates: 6–7 Mar, 31 Mar, 2 May 2023
Approved Judgment
This judgment was handed down remotely by email and MS Teams. It will also be sent to The National Archives for publication. The date and time for hand-down is 9.30 a.m. on 30 June 2023
ICC Judge Barber
This application is concerned with creditors' voting rights in the context of a creditors' voluntary liquidation. The Applicant, as a creditor of C.C.T. Logistics Limited (‘the Company’) appeals the decision made by the First Respondent (‘the Liquidator’) to allow the Third Respondent (‘CCI’) to vote on a proof of debt of £51,412.83 at a creditors' meeting held on 26 August 2021. The Applicant seeks a declaration that the votes cast by CCI on that proof were invalid and such further relief as the court thinks fit.
An alternative limb of the application, by which the Applicant sought an order pursuant to sections 108(2) and/or 171 of the Insolvency Act 1986 (IA 1986) that the Liquidator be removed and replaced by Mr Umang Patel, is no longer pursued. For this reason, the Applicant no longer seeks to rely upon some of the evidence given by Mr Joshi in his first witness statement and the Liquidator has been excused from attending for cross-examination.
Background
The Applicant is an accounting firm which until December 2020 acted as the Company's accountants. The Applicant claims to be owed £43,516.75 by the Company for its accounting services.
The Company was incorporated on 8 December 1993 and carried on the business of freight forwarding services. Since 2015, it has traded from leased offices at Suite 8A, AW House 6–8 Stuart Street, Luton LU1 2SJ (‘AW House’). The Company's directors are Mr Ian Murray and Mr Ricardo Nash (‘the Directors’). Mr Murray's wife, Mrs Suzanne Murray, was appointed as company secretary in 2019, but nothing turns on that. The Company's authorised share capital is 100 ordinary shares of £1 each; 50 are allocated to Mr Nash, 38 to Mr Murray and 12 to Mrs Murray.
The Company banked with Barclays Plc. In 2001, the Company granted Barclays a debenture over its assets. On 22 November 2012, Mr Murray and Mr Nash entered into a personal guarantee of the Company's overdraft facility with Barclays, limited to the sum of £125,000.
In 2012, Mr Nash moved to Spain. Mr Murray felt that there was a serious imbalance in the workload following Mr Nash's move to Spain. This led to a strain in their relationship, both business and personal.
During 2019, the Directors explored a buy-out by Mr Murray of Mr Nash's interest in the Company. Mr Murray was offering a package worth in the region of £60–70,000. Mr Nash wanted more. By email dated 24 September 2019, having put forward his latest offer, Mr Murray urged Mr Nash to come to a deal, stating (with emphasis added):
‘I am unwilling to continue to be solely responsible for managing the company under the current circumstances and require your acceptance to the above offer. If no response is received, I will take appropriate measures.
Having taken legal advice I am prepared to liquidate [the Company], and have already taken steps to ensure smooth transition of clients if necessary.’
The ‘steps’ referred to appear to have included the incorporation of CCI on 31 July 2019. CCI was set up by Mr Murray but was dormant initially.
Mr Murray and Mr Nash could not agree on the terms of a buyout. The email exchanges became increasingly bitter. By 20 December 2019, Mr Nash emailed Mr Murray reminding him, inter alia, that there ‘would have been no [Company] without me joining’. Mr Nash also stated, in a somewhat accusing manner, ‘ Know all about setting up of [CCI] on 31 July with you as sole shareholder’. Mr Murray responded the same day, stating tersely ‘We will not be parting amicably’.
CCI began trading in or about June 2020, carrying on the same business as the Company; freight forwarding services. As with the Company, CCI traded from AW House. CCI dealt with the same or substantially the same clients and suppliers as the Company. In oral testimony Mr Murray explained that he chose CCI's name because it was ‘a name known to [his] clients’. Mr Murray was initially CCI's sole director and sole shareholder. Mr Murray remains sole director but his wife and son have since joined him as shareholders.
CCI's trading overlapped with that of the Company for several months. The Company did not finally cease to trade until the spring of 2021, although it was clearly being ‘wound down’ before then; in December 2020, the Applicant ceased providing accountancy services to the Company due to unpaid fees and in the same month, Mr and Mrs Murray came off the Company's PAYE payroll. Mr Murray went onto CCI's PAYE payroll in February 2021. In some cases (over the period June 2020 to Spring 2021) the Company successfully quoted for a job but then CCI performed it. In oral testimony Mr Murray said that there was ‘a lot of overlapping’.
In or by April/May 2021, the Company ceased trading altogether.
On 1 June 2021, the first compulsory striking off gazette notice was published at Companies House in respect of the Company. This warned that unless cause was shown, the Company would be struck off the register and dissolved in 2 months, for failure to file accounts. Barclays spotted the notice and wrote to Companies House objecting to the Company being struck off, on the grounds that the Company owed it money. As a result of Barclays' objection, compulsory striking off action was suspended on 12 June 2021.
In the meantime, on 2 June 2021, Mr Murray had an ‘informal discussion’ with Mr Cottingham of Libertas Associates Limited (‘Libertas’) at the Company's office at AW House ‘about the process for liquidating the Company’ (Murray (1) para 33). Libertas had a satellite office and plaque at AW House, but no physical presence there; its main office was in Bushey, Hertfordshire. Prior to his death in 2020, Mr Allen, the director of the Company's landlord AW Group Limited (‘AW’) had recommended to Mr Murray that he contact Libertas in the event that a deal could not be achieved with Mr Nash: Murray (1), para 35. Mr Cottingham of Libertas knew Mr Allen: Barnett (1) para 60(c). The Applicant maintains that Mr Murray was looking for a ‘quiet burial’. Mr Murray denies this.
Following that initial informal discussion on 2 June 2021 and conflict checks, on 14 June 2021, Libertas sent a letter of engagement dated 14 June 2021 to the Company for counter-signature (Barnett (1) at para 9). The letter provided (among other things) for a pre-appointment fee of £5,212 (inclusive of VAT) (‘the Libertas Fee’). The letter was counter-signed by Mr Murray on behalf of the Company on 16 June 2021.
By his written evidence, Mr Murray placed great store by his initial meeting with Mr Cottingham on 2 June 2021. In his first witness statement, he stated that he had expressed concerns at that meeting about the personal guarantees which he and Mr Nash had given to Barclays. At [47] he stated:
‘[47] At the first meeting with Libertas, I was asked about the debts of the Company and whether any Personal Guarantees had been given. I explained that there was a debt to Barclays bank in relation to which [Mr Nash] and I had both given Personal Guarantees. I felt that, despite the Personal Guarantees being on a joint and several basis, it was very unlikely that the Personal Guarantee could be enforced against [Mr Nash] as he was no longer resident in the UK. I was concerned that all the responsibility would fall on me but I did not personally have the funds to discharge this and I asked whether [CCI] would be able to pay it. It was suggested to me that the proper way to do this was for the Company to ask [CCI] to discharge its debt such that the Personal Guarantees would not be implemented. These monies would then be classed as a Directors Loan between myself and [CCI]. The Company therefore held a Board Meeting on 22 nd June 2021 at which it was resolved that the Company would request that [CCI] pay the debt when demanded by Barclays. At a meeting of shareholders of [CCI] on 11 August 2021 it was agreed that [CCI] would pay the sum of £34,976.86 to Barclays Bank when demanded. This it did, prior to the liquidation (IM pages 61–62). I now owe this money to [CCI] by way of a Directors' Loan Account.’
Contrary to Mr Murray's written evidence (and as conceded by him in cross-examination), the Company did not hold a board meeting on 22 June 2021. At best, a meeting of some of the members of the Company (Mr Murray and his wife, representing 50% of the shareholders) took place that day. A document dated 22 June 2021, headed, ‘Minutes of a meeting of members’, states that the meeting was held ‘to discuss the proposal that [CCI] be requested to arrange payment of [the Company's] liability to Barclays Bank for the overdraft facility which had been secured against the personal guarantees of the Directors’. The document records that it was ‘resolved that [CCI] would be requested to arrange payment of the outstanding amount on demand from Barclays’. In cross-examination, Mr Murray accepted that the resolution meant that ‘at some point in the...
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